Buying a property with someone else certainly sounds like a good idea. By pooling your resources you may be able to purchase a home that otherwise would have been out of your reach. This is the conclusion Miles and Katya got to. The two colleagues were able to buy a 25% share of a Willow Walk home in Wandsworth, making their move to London an investment and even more economical than renting.

There are things to consider to ensure your experience of buying a home with someone else is as smooth as possible. It is important to define what you want beforehand and be upfront with each other about your expectations.

Andrew Theoff from Direction Law, one of Peabody's panel solicitors, looks at the legal implications of buying a property jointly with someone else. Follow this Peabody New Homes guide to figure out how to buy a house with multiple owners without ever ending up in a legal battle or financial crisis.

What does joint ownership of property mean?

Joint ownership takes place when two people decide to purchase a property together. The most common situation is when married or unmarried couples buy a home together, but joint ownership may also be when friends or family members choose to jointly purchase a property. 

What is the difference between joint tenants and tenants in common?

Under UK law there are two ways you can become a joint owner of a property: you can either become joint tenants or tenants in common.

• Joint Tenants - if you sell the property, the sale proceeds will be split 50:50
• Tenants in Common - if the property is sold, the sale proceeds can be either split equally or unequally. The presumption would be an equal split, but where monies are provided unequally a Trust Deed can be entered into between the parties which set out the proportions owned by each party.

Can I take out a joint mortgage with my partner, sibling, or parent?

If joint mortgages are usually taken out by married couples, it is totally possible to take one out with your (unmarried) partner, a friend, or a family member. In fact, some lenders will allow up to four people to take out a joint mortgage.

The benefits of taking out a joint mortgage are that by pooling your finances you will be able to purchase a more expensive property or, in the case of Shared Ownership, a bigger chunk of your new property. Joining forces with friends or family can also allow you to buy your home in the location of your dreams, which might not have been possible by yourself!

Things to consider when buying a property with someone else

There are many things to discuss before deciding on joint ownership of a home. The first thing is to decide on the type of co-ownership you wish to choose. Secondly, decide on what documents you need to have in place to avoid problems in the future. Bear in mind that tenancy in common accompanied by a will and a Trust Deed will give you the highest level of protection.

Some of the questions you need to answer in advance include:

• Are you contributing equally to the purchase price? If not, a Trust Deed should specify whether the ownership should be split equally or proportionally to initial contribution.
• Have you have agreed to pay the mortgage and other costs equally? Again, if not, Trust Deed will specify if the ownership should be split equally or proportionally to ongoing contribution.
• Do any of you wish to leave your share in the property to somebody other than your co-owner? If so, you will need to specify this in your will.
• What happens if you die? Again, the will is instrumental in specifying this.
• What happens if one of you wants to sell and the other does not? (a Trust Deed may help here)
• What happens whilst you are alive if you and your co-owner go your separate ways and/or dispute the shares you own in the property?

The lender will look not only at the earning potential of each of the applicants but also at their outgoings and credit scores. So if you're planning on buying a home with somebody with a poor credit score it can actually damage your chances of getting a good mortgage.

Another potential problem relates to the mortgage. The property will likely have been purchased using a joint mortgage and as such you will be “jointly and severally liable” for the debt. This means that should one of you default or disappear and fail to maintain the mortgage repayments, the lender could look to the remaining borrower for all of it.

Colleagues Miles and Katya have successfully become homeowners through Shared Ownership

Why have a Trust Deed?

If you’ve bought a tenancy in common, we recommend you have a Trust Deed or a Declaration of Trust. This is a legal document that does two things: 

• Spells out who owns what percentage share of the equity, and 
• It can be used to spell out a mechanism for one party to buy the other one out. So if one wants to sell, then rather than putting the property automatically on the open market, they agree to offer it to the other party first. 

Having a Trust Deed is very important because it means that people will have the ability to stay in their own home, even if their relationship falls apart. 

What happens if one tenant wants to sell and the other doesn’t?

• Joint Tenants - if only one of you wants to sell (perhaps to get their money out) then they cannot do so without applying to the court to force the sale against the wishes of the co-owner. The Court may or may not agree.
  
  
• Tenants in Common - it is easier to sell when you own the property as Tenants in Common because as soon as one party wants to sell the other has no choice. In addition, a Trust Deed can have provisions written into it that state what happens should one owner want to sell - such provisions usually state that the owner not wanting to sell gets the opportunity to buy the other owner’s share and if agreement cannot be reached within a certain timescale, the property must be sold on the open market and any profits divided according to the Trust Deed.

What happens when you die?

 Joint Tenants - on the death of one of the owners, their share automatically goes to the surviving owner, irrespective of whether there is a Will or not. Buyers considering owning as Joint Tenants need to consider if this is what they want or need.

Tenants in Common – on the death of one of the owners, the share owned by that person does not automatically pass to the other owner, it passes according to the deceased person’s Will or if there is no Will then it passes to their nearest surviving relative under the rules of “survivorship”.

Why have a will?

While the Declaration of Trust says what happens to a property when you’re selling it during your lifetime (see below), a will specifies what happens when one or both of you die. This is especially important when your co-owner is not your next of kin, i.e. your spouse. If you want your property to pass onto your joint owner in the event of your death, then you have to leave it to them in a will. Otherwise, they will find themselves owning the property with whoever your next of kin is.

Deciding to co-own a property with somebody else is a huge decision that can have a life-changing impact on your quality of life down the line so you must get specialist advice from a qualified solicitor before making any binding decision.

If you like the idea of owning a property either individually or with someone else, start your journey by looking through our selection of stunning homes available to purchase through Peabody.